Key Info Hero

Political Calendar Full

29 Nov 2016

Jack Turner, Research Analyst

Elections in Europe from now till early 2018, last week’s Autumn statement, the latest EU Purchasing Managers’ Index numbers, and an update on the French President nominations.

POLITICAL CALENDAR FULL

A full calendar of polling activity from not to early 2018 could easily impact markets given how much they dislike uncertainty. 
Key Info

 

NEWS

 

AUTUMN STATEMENT KEPT LIGHT

Phillip Hammond presented a cautious Autumn Statement reflecting the uncertainty hanging over the British economy. This uncertainty is set to lead through to lower growth, with forecasts cut to 1.4% in 2017 and 1.7% in 2018. There were some increases to infrastructure spending including some boosts to broadband investment. However, the Chancellor is still implementing a fiscal tightening next year. In being cautious and by signalling a willingness to increase borrowing still further if needed (over and above the £122bn announced for the next five years), Hammond is giving himself some room for manoeuvre if he needs to kick start the economy in the future.

 

EU STILL GROWING

Eurozone Purchasing Managers Indices (PMIs) released last week were strong, suggesting that GDP growth is accelerating in Q4. The composite PMI in the Eurozone rose to 54.1 in November from 53.3 in October, which was above the consensus of 53.3.  Data was also released in Germany and France. Germany saw steady numbers, however the French PMIs beat consensus, driven by growth in the services sector.

 

FRENCH CENTRE RIGHT SET

Former French Prime Minister, François Fillon won the second round of the French centre-right primaries on 27 November earning 66.5% of the vote on a high turnout. He will now contest the Presidential race next May with his
main
adversary likely being the National Front candidate Marine Le Pen, although the socialist candidate has still to be chosen. Fillon has a strong mandate centred on much needed labour market reforms, which are policies that Le Pen will attack. There is currently a 30% probability of Le Pen winning against Fillon in May, but our recent experience with polls has taught us to be careful.

 
PORTFOLIO ACTIONS

The investments that 7IM made on the back of the US election results continued to move higher.

 

For US Financials, valuations from the sector had been low and the Republican party’s history of loosening regulation (such as the call to repeal Dodd-Frank), a rising interest rate environment and Trump’s plans for fiscal stimulus would all help. The sector is also in good shape with healthy levels of capitalisation that would allow the banks to generate improving returns on equity than they have in recent years.

 

The position in US mid-caps via the Russell 2000 index also benefitted portfolios as the week ended with a shortened Black Friday trading session on its 15th day of advancement in a row.

 

THREE ANNOUNCEMENTS DUE THIS WEEK
29 November – US GDP Q3 2nd Ext. // 01 December – EU Unemployment Rate // 02 December – US Unemployment Rate


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Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales number OC378740. The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The investments maynot be suitable for everyone and if you have any doubts you should contact your investment advisor.

 

SOURCES: BLOOMBERG; 7IM


The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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